ND's legacy on '80s ag recovery: Farmer helped implement famous PIK program

EDITOR'S NOTE: This story is the final installment in a four-part series: "Farm Crises - The 1980s and now," comparing the economic and political conditions between what was known as the "farm credit crisis" of the 1980s, a decade when one in four farms failed because of economic losses and the conditions farmers are facing today.

MOTT, N.D. - A big, ambitious man from Mott, N.D., was an early victim of the 1980s farm credit crisis, and would play a key government role in getting money back in the hands of farmers.

Milton J. "Milt" Hertz ran a 26,000-acre farm, with 750 beef cows. The farm had up to 30 full-time and seasonal employees, and ran five of the iconic Steiger tractors that were made in Fargo. His son, Shane, graduated high school in 1980, and was at his side. But the juggernaut stopped rolling with a farm sale in 1982.

Fate would send Milt to Washington and his son into a smaller farming career.

Next big thing

Milt was born in 1935 and graduated high school in 1951, Dickinson State University in 1955, taught school at Edgeley, N.D., and married Carol Ormston in 1957. The couple moved to Havre, Mont., where he taught business for two years.

In 1959, Milt and Carol returned to Mott to farm.

Milt stood 6 feet 6 inches tall, and had big ideas about farming. In 1969, Milt was one of four farmers nationwide to be named a winner of the Jaycees Outstanding Young Farmer award. Among the other winners was John Block, a hog and corn farmer from Illinois.

Milt was one of the first to bring anhydrous ammonia, a form of nitrogen fertilizer, to western North Dakota. In the early 1970s, Milt became an early promoter of sunflowers in the western part of the state. One year he grew 11,000 acres of sunflowers.

"He was constantly looking for something out of the norm to better our operation and take it to the next step," Shane remembers.

Along with his impressive farm, Hertz took time to become president of the Mott School Board, and became a member and president of the North Dakota Board of Higher Education. Carol was active in state Republican politics and the Jaycees.

The 1980 and 1981 droughts changed things. Hertz Farms was fighting 20% annual interest rates on loans and low commodity prices. In 1982, Milt folded the tent on the "big operation" and sold out. "Everyone got paid," Shane says.

In 1981, President Ronald Reagan appointed Milt's Outstanding Younger Farmer friend, Block, as his secretary of agriculture. Block succeeded Bob Bergland, from Roseau, Minn., who served under President Jimmy Carter.

Carter in 1980 had placed an embargo on grain sales to Russia, which helped depress prices and fill bins.

Milt would serve in the Agricultural Stabilization and Conservation Service in Washington, D.C. He started as deputy administrator for state and county operations, then associate administrator in 1985 and finally administrator from 1988 to 1989. (The ASCS later was renamed Farm Service Agency).

Back home, Shane bought two of his father's tractors, and went farming with his grandfather, Gothold, on 3,000 family acres "He was down there, trying to save all the farmers in North Dakota and do the best he could with it," Shane says. "If the government was going to use our commodities as (political) leverage, we should probably be getting something in return."

Big 'crop swap'

Hertz was instrumental in administering the famous emergency "payment-in-kind" program, which idled some 82.3 million acres of land previously planted to wheat, corn, and other crops. The program handed out $12 billion in so-called "free" grain in return for cutting production by 36%. PIK payments were exempted from a $50,000 federal farm program payment cap per farmer per year.

"It's really a crop swap," Reagan told his supporters in the American Farm Bureau Federation meeting in Dallas in 1983.

In the PIK program, a farmer would idle 10% to 30% of their acres of what they'd normally grow of wheat and feed grains and, in exchange, could acquire grain out of government storage. On top of that, they'd also take out 20% of their wheat or corn production under pre-existing "diversion" programs of the day. So the total idled was up to 50% of 1983 of a farmer's "base" acres of wheat and feed grains, such as corn.

Significantly, the farmer wouldn't incur input costs of seed and fertilizer, or the machinery costs. The 1985 Farm Bill included a Conservation Reserve Program, which started at 15 million acres in 1987 and grew to 30 million by 1990.

With lack of production, equipment manufacturers suffered. Fargo's fabled Steiger Tractor Co. would file Chapter 11 bankruptcy in 1986.

Under PIK, farmers would redeem grain certificates for grain, and sell it for market-clearing prices. It was a circus of sorts. Cert "redemption rates" differed among counties, and farmers flew into small airports in some remote counties across the country where they could acquire the most grain.

Shane says he couldn't do any of the fancy PIK moves, with the government and the media watching his father. "I was told not to," Shane remembers. "Dad said that was not the idea of how it was supposed to be working."

Coming home

At the end of the Reagan administration, Milt and Carol returned to Mott in 1989, as the farm was experiencing another drought. (In Washington, Milt was replaced as ASCS chief in the George H.W. Bush administration by Keith Bjerke, another Outstanding Young Farmer winner from Northwood, N.D.)

After the 1988 drought, Shane wanted to try "zero-till" farming. "It didn't take Dad long to realize that was something to do on our acres," he says.

Shane and Milt farmed what they could handle with one seasonal employee. The farm started to reach a new prosperity until the early 1990s.

"My goal was always to farm 10,000 acres by myself," Shane says. In the late 1990s, he married Stacey Zent, who grew up south of Mott. They have three children, MacKenzie, 25, an attorney in Omaha, Sean, 21, and Morgan, 17.

Carol Hertz died in 2002. Milt died in May 2010.

Now 57, Shane says that once again, markets are poor and government intervention is having a negative effect on trade and markets. The Trump administration trade wars with China, and disruptions in the North American and European Union markets are reminiscent of the Russian grain embargo. "It scares the hell out of me," he says.

Interest rates are going down now, but Shane thinks that if interest rates would climb to 10%, farmers would be in the "same or worse" straits than they were in the 1980s. But the Hertzes are taking the long view. "Our farm's been around since 1905," Shane says. "We're proud of that ground. It's put a lot of kids through college. It's done a lot for us. I am the steward of that land and I would like a say in the next generation that farms it."